Tax and policies incentives

Tax System

This chapter focuses on the main aspects of the Portuguese tax system, briefly presenting the main taxes existing in Portugal as well as the Social Security contribution system and some tax benefits, of which we highlight the most relevant in the context of corporate investment in Portugal.

 

Corporate Income Tax (IRC)

Personal Income Tax (IRS)

Value Added Tax (IVA)

Municipal Property Tax (IMI)

Real Estate Transfer Tax (IMT)

Stamp Duty (IS)

Other Indirect Taxes

 

Source: Portugal Global – Trade & Investment Agency (AICEP)

 

1.Corporate Income Tax (Imposto sobre o Rendimento das Pessoas Coletivas, IRC) 

IRCCorporate Income Tax (Imposto sobre o Rendimento das Pessoas Coletivas, IRC)
Effective Date1 January 1989 (IRC reform came into force on 1 January 2014)
Tax rates

Normal rate: 21%

Municipal surtax (“derrama municipal”) up to 1.5% levied on taxable profits (applicable rate depends on the municipality)

State surtax (“derrama estadual”) of 3% on taxable profits exceeding €1.5 million, 5% on taxable profits exceeding €7.5 million and 7% on taxable profits exceeding €35 million.

ExemptionsIRC exemptions are available for the State, Autonomous Regions, local authorities and any of their departments, capitalisation funds and income from capital managed by social security institutions, among others.
Returns

Periodic Statement of Return Model 22, to be submitted until May 31 of the following year.

Other ancillary obligations (registration, accounting and tax information, amendments, cancellation of registration and monthly remuneration statements, model 30, etc.)

For more information, please visit: https://portugalglobal.pt/PT/InvestirPortugal/Sistema%20Fiscal/Paginas/ImpostoRendimentoPessoasColetivasIRC.aspx

 

 

2.Personal income tax (Imposto sobre o Rendimento das Pessoas Singulares, IRS) 

IRSPersonal income tax (Imposto sobre o Rendimento das Pessoas Singulares, IRS)
Effective Date1 January 1989 (IRS latest reform came into force on 1 January 2015)
Tax rates

Progressive rates up to 48%

Additional solidarity rate of 2.5% or 5%, depending on the taxable income

Exemptions and reduced ratesExemptions and reduced rates may be applicable under special regimes (e.g., payments from insurance companies and non-habitual residents)
ReturnsAnnual tax return Statement Model 3, to be submitted from 1 April to 30 June of the year following the year to which the statement corresponds. Deadline may be extended to 31 December in case foreign-income is earned.

For more information, please visit: https://portugalglobal.pt/PT/InvestirPortugal/Sistema%20Fiscal/Paginas/ImpostosRendimentoPessoasSingularesIRS.aspx

 

 

3.Value Added Tax (VAT)

VATValue Added Tax (VAT)
Effective Date1 January 1986
Tax rates

Mainland – 23% (Intermediate 13% / Reduced 6%)

Madeira – 22% (Intermediate 12% / Reduced 5%)

Azores – 18% (Intermediate 9% / Reduced 4%)

ExemptionsAlthough they are subject to VAT rules, some transactions are VAT exempted. Exempted transactions which do not confer the right to deduct input VAT are called “incomplete exemptions”; transactions which, although exempted, confer the right to deduct VAT are called “full exemptions”.
Returns

Periodical returns

– Monthly, until the 10th day of the second month following the respective tax period; or, if annual turnover is below €650 000, quarterly, until the 15th day of the second month following the respective tax period.

Recapitulative return

– Until the 20th day of the month following the intra-community supply of goods and services delivery, in the case of taxable persons with a monthly periodicity to send the Periodical return;

– Until the 20th day of the month following the transactions, with respect to the taxable persons with a quarterly periodicity to send the Periodical return, of which the total value of intra-community supply of goods to be included in the recapitulative statement exceeds 50 000.00 Euros, in the current quarter or in any of the previous four quarters.

Intrastat return

– Until the 15th day of the month following the intra-community movement of goods;

– Until the 20th day of the month following the end of the calendar quarter to which the transactions refer to, with respect to the taxable persons with a quarterly periodicity to send the Periodical Return, of which the total value of intra-community supply of goods to be included in the recapitulative statement does not exceed 50 000.00 Euros, in the current quarter or in any of the previous four quarters.

Annual return

– Until the 15th July (or the 15th day of the 7th month following the end date of the tax period of IRC, if different from the civil year).

For more information, please visit: https://portugalglobal.pt/PT/InvestirPortugal/Sistema%20Fiscal/Paginas/ImpostosValorAcrescentadoIVA.aspx

 

 

4.Municipal Tax on Real Estate Holdings (Imposto Municipal sobre Imóveis, IMI) 

IMIMunicipal Tax on Real Estate Holdings (Imposto Municipal sobre Imóveis, IMI)
Effective Date1 December 2003 (replacing the Municipal Property Tax – “Contribuição Autárquica”)
Tax rates

Rural buildings: 0.8%

Urban buildings: 0.3% to 0.55%

Buildings held by entities resident in tax havens: 7.5%

Exemptions

Urban buildings used as own permanent residence

Buildings for tourism use

Buildings subject to urban rehabilitation

Payment

Amounts up to €100 – One instalment in May

Amounts from €100 to €500 inclusive – Two instalments in May and November

Amounts above €500 – Three instalments in May, August and November

For more information, please visit: https://portugalglobal.pt/PT/InvestirPortugal/Sistema%20Fiscal/Paginas/ImpostoMunicipalImoveisIMI.aspx

 

 

5.Property Transfer Tax (Imposto Municipal sobre Transmissões Onerosas de Imóveis, IMT) 

IMTProperty Transfer Tax (Imposto Municipal sobre Transmissões Onerosas de Imóveis, IMT)
Entry into force1 January 2004 (replacing the Municipal Property Transfer Tax – “Imposto Municipal de Sisa”)
Tax rates

Rural buildings: 5%

Urban buildings exclusively used as one’s permanent residence – between 0% and 6%

Urban buildings exclusively used for residential purposes – between 1% and 6%

Urban buildings not exclusively used for residential purposes nor onerous acquisitions – 6.5%

Buildings (urban or rural), or other acquisitions, acquired by a resident in a country, territory or region clearly subject to a more favourable tax regime – 10%

Exemptions

Buildings acquired for resale;

Buildings individually classified as of national, public or municipal interest;

Buildings acquired by credit institutions in enforcement, bankruptcy/insolvency proceedings or in lieu of payment;

Buildings located in business areas.

PaymentIn general, the IMT should be paid before the act or fact of the assets transfer. When the transfer is made by an act or contract executed abroad, the IMT should be paid in the following month.

For more information, please visit: https://portugalglobal.pt/PT/InvestirPortugal/Sistema%20Fiscal/Paginas/ImpostosTransmissoesOnerosasImoveisIMT.aspx

 

6.Stamp duty

 Stamp duty
Effective Date1 March 2000
Taxable transactionsStamp Duty is levied on those acts, contracts, documents, securities, books, papers and other facts, expressly set out in the General Table, occuring in Portugal and not subject to or exemption from VAT.
ExemptionsSome facts benefit from stamp duty exemption but this may be conditioned to the verification of certain requirements.
ReturnsAnnual discriminative return referring of Stamp Duty

For more information, please visit: https://portugalglobal.pt/PT/InvestirPortugal/Sistema%20Fiscal/Paginas/ImpostoSelo.aspx

 

Source: Portugal Global – Trade & Investment Agency (AICEP)

 

Incentives

1.Contractual Tax Benefits for Productive Investment

Contractual benefits for Productive Investment may be granted to projects with relevant applications in an amount equal to or above 3M€, until 31 December 2020.

 

For more information, please visit:  https://www.iapmei.pt/PRODUTOS-E-SERVICOS/Incentivos-Financiamento/Beneficios-fiscais-(1)/Beneficios-contratuais.aspx

 

2.DLRR – Deduction of Profits Retained and Reinvested

It is an incentive measure for SMEs that allows the deduction from IRC of profits retained, which the reinvestment is deemed relevant.

 

For more information, please visit: https://www.iapmei.pt/PRODUTOS-E-SERVICOS/Incentivos-Financiamento/Beneficios-fiscais-(1)/DLRR.aspx

 

3.RFAI – Tax Regime for Investment Support

It is a tax benefit that allows companies to deduct a percentage of the investment made in non-current assets from the taxable income.

 

For more information, please visit: https://www.iapmei.pt/PRODUTOS-E-SERVICOS/Incentivos-Financiamento/Beneficios-fiscais-(1)/RFAI.aspx

 

4.SIFIDE –Tax Incentives System for Research and Business Development

It supports companies in their R&D efforts by deducting the corresponding expenses from the IRC.

 

For more information, please visit: https://www.iapmei.pt/PRODUTOS-E-SERVICOS/Incentivos-Financiamento/Beneficios-fiscais-(1)/SIFIDE.aspx

 

Source: Agency for Competition and Innovation, I. P (IAPMEI)